Developer must be paid: ConCourt

Cape Town - The Constitutional Court on Thursday dismissed an appeal against a judgment and order of the Supreme Court of Appeal (SCA) in a matter involving a property developer and a client.

The matter dates back to 2006, when property developer Cool Ideas entered into a building contract with client Anne Hubbard.

The property developer enlisted the services of Velvori Construction CC, a building construction company, which was registered as a home builder in terms of section 10 of the Housing Consumers Protection Measures Act (Housing Act).

Work on the buildings was practically completed in October 2008 when Hubbard took issue with the quality of the work and refused to make the final payment.

She instituted arbitration proceedings in terms of the building contract, claiming the cost of remedial works.

Hubbard's claims were dismissed by the arbitrator following Cool Ideas' defence and counter-claim for the balance of the contract price.

Hubbard then failed to comply with the award determined by the arbitrator.

Cool Ideas approached the High Court in Johannesburg for an order enforcing the award.

Hubbard opposed the application, contending that Cool Ideas was not registered as a home builder in terms of the Housing Act.

Subsequent to Hubbard's contention, Cool Ideas registered as a home builder and argued that in any event at the time of executing the building works, it had done so in co-operation with Velvori Construction, which was a registered home builder.

The high court then granted the application and made the arbitral award an order of the court.

Hubbard then approached the SCA, which upheld her appeal, stating that the purpose of the Housing Act was to protect consumers.

Both Cool Ideas and Velvori Construction were required to be registered before taking on the building project.

The SCA held that enforcing the award made in arbitration would disregard what is clearly prohibited in law.

This led to the application, by the developer, to the Constitutional Court, which had to examine, among other things, whether an award should be enforced on a client who refuses to pay after committing to a contractual agreement.

In its majority judgment on Thursday, the Constitutional Court found that a reading of the Housing Act made it clear that Cool Ideas was prohibited from commencing building works, and that by enforcing the award, the court would be condoning an illegality.

“The interpretation given by the Supreme Court of Appeal to section 10(1)(b) of the Housing Protection Act, namely that registration is a prerequisite for building works to be undertaken by a home builder, must be upheld.

“Failure to register would result in the home builder being ineligible to seek consideration for work done in terms of a building agreement,” the Constitutional Court ruled.